In fight over drug discounts, HHS lawyer sides with hospitals

Prominent drug companies have said they want to curb waste and abuse in the 340B Drug Pricing Program. But the top lawyer at HHS is echoing the criticism hospitals have been leveling against the drug companies over access to the program.

Federal regulators are siding with hospitals in their fight with drug manufacturers over a drug-discount program.

Citing the potential for waste and abuse, at least six manufacturers have taken steps over the last few months to restrict or condition sales to pharmacies that contract with hospitals to distribute discounted drugs through the program.

A coalition of hospitals responded in December with a lawsuit asking regulators to crack down on the manufacturers. The program, known as the 340B Drug Pricing Program, benefits people who are uninsured or underinsured.

In an advisory opinion issued at the end of 2020, the general counsel for the U.S. Department of Health and Human Services upbraided drug manufacturers over their actions.

“Certain manufacturers’ newfound and unilateral refusal to sell drugs through contract pharmacies is at odds with the structure and intended operation of the statute,” wrote Robert P. Charrow, the agency’s general counsel.

Hospital groups praised the advisory opinion, which echoes some of the arguments they have been making over the last few months. The opinion does not carry the force of law, however.

“We are pleased that HHS listened to our deep concerns about drug companies disregarding the law by limiting the distribution of certain 340B drugs to eligible hospitals,” Rick Pollack, president and CEO of the American Hospital Association, said in a statement. “These concerns led us to file a lawsuit earlier this month to require HHS to stop these illegal actions from drug companies and protect vulnerable patients and communities.”

The program is overseen by the Health Resources and Services Administration, or HRSA, an arm of HHS. In his statement, Pollack called on HRSA to take “swift and decisive action” to block the drug-company actions.

Pollack and another industry advocate indicated that hospitals also expect some kind of financial compensation for discounts that allegedly have been denied.

“The important work of repairing the damage done to these hospitals must begin as quickly as possible,” Mauren Testoni, president and CEO of 340B Health, a coalition of safety-net hospitals, said in a statement. “We stand ready to work with the department to identify overcharges and facilitate refunds.”

The advisory opinion said the companies are obligated to deliver covered drugs at discounted prices to contract pharmacies. It also notes that there are existing processes for resolving disputes

But the companies appear to be unmoved by the HHS counsel’.

Drugmakers singled out in the hospitals’ lawsuit are AstraZeneca, Eli Lilly, Novartis, Novo Nordisk, Sanofi Aventis and United Therapeutics Corp.

“We are still assessing the U.S. Health and Human Services advisory opinion issued on Dec 30 and its implications,” Eric Althoff, a Novartis spokesman, wrote this week in an emailed statement.

“Novartis firmly supports the core mission of the 340B program to increase access to outpatient drugs among uninsured and other vulnerable patients,” Althoff continued. But the statement reiterated industry concerns about the program, particularly the growing use of contract pharmacies, many of which are for-profit chains.

“The unfortunate reality is that the overwhelming majority of discounts from medicines dispensed at pharmacies are not shared with patients,” Althoff wrote. “These discounts benefit for-profit pharmacies, third-party administrators, other midddlemen and hospitals with no requirement that those funds be used for charitable care at hospitals.”

Hospitals argue that contract pharmacies allow for greater access to medication, especially in rural areas. 

Althoff said the 340B program needs to be reformed and that Novartis would work with regulators and lawmakers to that end.

A spokesperson for Sanofi, who did not want to be identified, said the company was not planning to change its practices following the HHS opinion. The company enacted a policy last fall under which it asks for de-identified claims data on 340B drugs dispensed by contract pharmacies as a means of identifying potential waste and abuse. If hospitals don’t provide the data, it will ship drugs only to the hospital itself.

Spokespersons for AstraZeneca, Lilly, Novo Nordisk and United Therapeutics did not respond to emails and phone calls requesting comment.

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